The FCC's Heavy Hand
Federal regulators should not be telling Internet service providers how to run their businesses.

Monday, September 28, 2009

IN A SPEECH at the Brookings Institution last week, Federal Communications Commission Chairman Julius Genachowski promised that his agency's plan for regulating Internet service providers (ISPs) will be "fair, transparent, fact-based and data-driven."

That's nice. But Mr. Genachowski failed to convincingly answer the most important question of all: Is this intervention necessary?

Mr. Genachowski claims to have seen "breaks and cracks" in the Internet that threaten to change the "fundamental architecture of openness." He and other proponents of federal involvement cite a handful of cases they say prove that, left to their own devices, ISPs such as Comcast Corp. and AT&T will choke the free flow of information and technology. One example alluded to by the chairman: Comcast's blocking an application by BitTorrent that would allow peer-to-peer video sharing. Yet that conflict was ultimately resolved by the two companies -- without FCC intervention -- after Comcast's alleged bad behavior was exposed by a blogger.

Mr. Genachowski offered two proposals to combat alleged ISP misconduct. One should be embraced, the other shelved.

Mr. Genachowski is right to insist that ISPs be candid with the agency and the public about network management practices. Such disclosures are necessary, Mr. Genachowski asserted correctly, to "give consumers the confidence of knowing that they're getting the service they've paid for" and "enable innovators to make their offerings work effectively over the Internet." Transparency should go a long way toward allaying the concerns of those who fear ISP manipulation of markets. It also puts in doubt the need for Mr. Genachowski's second, dubious offering.

Aptly dubbed an "immodest proposal" by the Free State Foundation's Randolph J. May, the FCC would prohibit ISPs from "discriminating against" different applications. Mr. Genachowski explains it this way: ISPs "cannot block or degrade lawful traffic over their networks, or pick winners by favoring some content or applications over others in the connection to subscribers' homes." In short, ISPs, which have poured billions of dollars into building infrastructure, would have little control -- if any -- over the kinds of information and technology flowing through their pipes.

In a slight concession, Mr. Genachowski said that the commission would consider whether to allow ISPs to offer "managed services in limited circumstances"; this approach could allow ISPs to create a two-track delivery system -- one for routine traffic, the other for applications that use exorbitant amounts of bandwidth. But unneeded regulation could still interfere with their ability to manage bandwidth-hogging applications that can hamper service, especially during peak times.

Mr. Genachowski claims that the FCC "will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity and entrepreneurial activity." He will advance this goal by insisting on transparency; he will jeopardize it -- and stifle further investments by ISPs -- with attempts to micromanage what has been a vibrant and well-functioning marketplace.